JetBlue Airlines 2009 Annual Report Download - page 37

points expirations can be extended. Based on extensive customer surveys, we believe this enhanced program
will make our product more appealing to the business customer.
On January 29, 2010 we implemented a new integrated customer service system, which includes a
reservations system, revenue management system, revenue accounting system, and customer loyalty
management system. Transitioning to this new platform offers many benefits which we believe will position us
well for our long term growth. These benefits include added flexibility in the complex environments we
operate under, opportunities for future codeshare and interline agreements, customer relationship management,
ancillary revenue opportunities, improved functionality of our website, and improved revenue management
capabilities.
In an effort to reduce delays and modernize the airport, the FAA and the Port Authority of New York and
New Jersey, or PANYNJ, have been undertaking major construction work at JFK. Their plans include the
creation of new taxiways and holding pads, runway widening and rehabilitation, as well as the installation of
new ground radar, lighting and other navigation equipment. Most significantly, this project will include the
closure and rehabilitation of the most important runway in our network. The JFK runway is scheduled to be
closed from March 1 through June 30, 2010. While we believe the results of this project will ultimately help
to alleviate some of the challenges of operating at JFK, our operations may be adversely impacted during the
runway closure. In order to help mitigate the impact of this closure, we, and the other major domestic carriers
operating at JFK have agreed to reduce flights throughout the closure period.
We derive our revenue primarily from transporting passengers on our aircraft. Passenger revenue
accounted for 89% of our total operating revenues for the year ended December 31, 2009. Revenues generated
from international routes, excluding Puerto Rico, accounted for 13% of our total passenger revenues in 2009.
Revenue is recognized either when transportation is provided or after the ticket or customer credit expires. We
measure capacity in terms of available seat miles which represents the number of seats available for
passengers multiplied by the number of miles the seats are flown. Yield, or the average amount one passenger
pays to fly one mile, is calculated by dividing passenger revenue by revenue passenger miles.
We strive to increase passenger revenue primarily by increasing our yield per flight which produces
higher revenue per available seat mile, or RASM. Our objective is to optimize our fare mix to increase our
overall average fare and, in certain markets, utilize our network to maximize connecting opportunities while
continuing to provide our customers with competitive fares. When we enter a new market our fares are
designed to stimulate demand, particularly from fare-conscious leisure and business travelers who might
otherwise have used alternate forms of transportation or would not have traveled at all. In addition to our
regular fare structure, we frequently offer sale fares with shorter advance purchase requirements in most of the
markets we serve and match the sale fares offered by other airlines.
Other revenue consists primarily of fees charged to customers in accordance with our published policies
relating to reservation changes and baggage limitations, the marketing component of TrueBlue point sales,
concession revenues, revenues associated with transporting mail and cargo, rental income and revenues earned
by our subsidiary, LiveTV, LLC, for the sale of, and on-going services provided for, in-flight entertainment
systems on other airlines.
We maintain one of the lowest cost structures in the industry due to the young average age of our fleet, a
productive non-union workforce, and cost discipline. In 2010, we plan to continue our focus on cost control
while improving the JetBlue Experience for our customers. The largest components of our operating expenses
are aircraft fuel and related taxes and salaries, wages and benefits provided to our crewmembers. Unlike most
airlines, we have a policy of not furloughing crewmembers during economic downturns and a non-union
workforce, which we believe provides us with more flexibility and allows us to be more productive. The price
and availability of aircraft fuel, which is our single largest operating expense, are extremely volatile due to
global economic and geopolitical factors that we can neither control nor accurately predict. Sales and
marketing expenses include advertising, fees paid to credit card companies, and commissions paid for our
participation in GDSs and OTAs. Our distribution costs tend to be lower than those of most other airlines on a
per unit basis because the majority of our customers book directly through our website or our agents.
Maintenance materials and repairs are expensed when incurred unless covered by a third party services
contract. Because the average age of our aircraft is 4.3 years, all of our aircraft currently require less
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